Impact of Russia-Ukraine war on India’s M&A landscape

Penned by Sakshi Sharma


The Russia-Ukraine war dates long back to 2014. It all started with the Revolution of Dignity resulting in the ousting of the Ukrainian government led by President Viktor Yanukovych. Following a series of coups, invasions and protests, there was a full scale escalation of the Russian military in Ukraine, which culminated into the Donbas War, sparking the ongoing battle. Relatively dormant for the past 7 years, it was re-triggered in 2021 following Ukraine being considered for inclusion in NATO. Realizing that the move will make it difficult to bring the states of Donetsk and Luhansk under control, Putin stimulated the decade long war.

Current Scenario

The war has been unexpectedly long, changing dynamics every now and then. The eastern region of the country, earlier under Russian control has now been recaptured by the Ukrainian army. This comes as a major defeat to Russia as it lost both towns, Izyum and Kupiansk, which were major logistical hubs in Donbas. However, in a surprising turn of events, Russia has announced a self-styled referendum in 4 other regions from 23rd to 27th September.  Russian President Vladimir Putin is expected to annex the four regions, Kherson, Zaporizhzhia, Donetsk and Luhansk, in the days following the referendums. The picture isn’t completely grim for Ukraine as it has surely made strides out south, capturing lost land, attacking bridges, ferries and pontoons, and attempting to make Russian positions of the west side of the Dnieper River unsustainable.

Implications on India’s M&A landscape

The implication of the war on the economy has been highlighted adequate number of times, also in one of our previous Macroscans (Link 1 under References). However, the M&A implications have been seldom talked about. Following is a list of the conflict’s implications on the Indian M&A landscape

  1. Increased Due Diligence – Numerous commodities are supplied by Russia and Ukraine, including global palladium (37%), natural gas (17%), wheat (13%), oil (12%), and nickel (9%). However, the conflict and the ensuing sanctions against Russia have disrupted supply chains, caused unexpected price increases, and hurt India’s trade balance. This has had a negative impact on Indian firms that depend on counterparties who buy from, sell to, or import goods from Russia or Ukraine. For example, the export of generic medications to Russia is a major source of revenue for the Indian pharmaceutical industry. As a result of the ongoing conflict between Russia and Ukraine, fewer firms who export medicines to Russia say they have received their reimbursements, which has disrupted the production cycle. All these factors need to be kept in mind while conducting a legal due diligence on Indian target entities to assess the impact the crisis may have on the business, operations and financial condition of the target entity. 
  • Enhanced representations and warranties: In light of the foregoing, deal teams must guarantee that sufficient security is incorporated into the transaction contracts to safeguard business continuity. For instance, it is necessary to incorporate strengthened representations and warranties with regard to certain areas of concern, such as the oil and gas sector, the supply chain, insurance, clients, and the ability to fulfill important contracts.
  • MAE clauses: In order to confirm that the seller is not requesting any exemptions for impacts caused by a war in a foreign nation, if appropriate based on the business of the target entity, buyers are now expected to assess the concept of a Material Adverse Effect in greater depth. Given the rapidly changing sanctions regime against Russia, an assessment of the exemption for legislative modification must be made.
  • Valuation: With rising fuel prices due to the war, the Indian rupee has witnessed depreciation against the US dollar. This, in turn, affects a number of factors such as increase in cost of products, domestic inflation, lending rates etc. All these criterions and their impact on the financial position of the target entities are required to be carefully assessed while valuing the target business so as to avoid the mistake of overpaying for the acquisition.  
  • Legal and reputational risk: As stated in (1) above, commerce with parties who have Russian connections in their group may be affected by sanctions against Russia, but these sanctions should also be taken into consideration while doing business. The shifting geopolitical backdrop, for instance, could prevent a seller from selling its stake to a foreign investment group with firms in Russia, even though India has not taken a particular stance in this dispute. Additionally, longer transaction durations could result from increasing regulatory scrutiny. Being involved in commerce with Russia or parties associated with Russia may not sit well with banks and commercial partners, which increases the reputational risk in addition to the legal danger.
  • Market fluctuation: Due to the economic crisis caused by the Russia-Ukraine war, market volatility has increased resulting in uncertainty in returns, and investors are now revisiting their acquisition strategy waiting for a better time to invest. The inflationary pressures and consequent increase in lending rates has aggravated the situation and affected liquidity in the market. As a consequence of all such reasons, share market investments are likely to see a decline. Unlike the bullish market sentiment of 2021, 2022 is likely to remain bearish. 

The war isn’t abating anytime soon. It, thus, becomes imperative for the Indian companies to consider the impacts on the M&A landscape going forward.


Apoorva | Jeevan | Priyank | Rajdeep | Sakshi | Shelly | Varnika

Anjaney | Harshit | Krithik | Pranita | Ragavan | Srishti | Vishal

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